In some ways it's a sort of. This is a two pronged story.
You have on one hand a slowdown through lockdowns and some bump business in
terms of the trajectory of demand and the supposed Covid of Reno
normalization. On the other hand what you're seeing is
a lot of volatility and uncertainty continue to exacerbate the supply
outlook mean that most companies that ought to be investing in future
production particularly the majors are not.
So since we're kicking the can down the road in terms of a tightening of the
fundamentals in the meantime potential just in enjoying course probably the
best word but ultimately taking advantage of some of the slowdown that
we've seen visiting China and some of the impacts of inflation.
Christine when we spoke with you last time we spoke about your report talking
about the inability for a lot of oil producers to actually produce enough oil
and that boy really had not counted in that potential shortfall.
We're just getting some headlines for Opaque Pack where Saudi Arabia telling
the nations that produce oil that they increase production up by more than 11
million barrels per day basically showing their ability their capacity to
increase output. Does that give you any confidence.
Have you said anything to change your view on that front.
Absolutely not. In fact it's probably consolidated our
view because what you have is effectively Saudi and sometimes other
members of the JCC essentially subsidizing through adding barrels into
the market. The oil price.
But ultimately that is a limited amount of reserves.
Right. So we were literally keeping their
powder dry through this spare capacity. We do believe Saudi can go north the
twelve twelve point two million barrels. But the reality is that we can't just
rely on opaque in Saudi to provide the marginal barrel because what you then
have is U.S. shale slowing down because council
falling because of logistics supply chain issues.
It's amazing. Pre and post Covid.
So you've dismantled it. A few things have gone rusty.
Put it back together again. And it's just not as effective in terms
of supply growth from shale. And then you left with
everybody else a non DCC non US which is the majors the overseas and they're
doing everything but investing in oil. And that's particularly because of all
the uncertainty not just about the front end volatility in the price but social
tax windfall tax giving cash back. So oil CapEx has never been as far back
in the queue. So that leaves more reliance on Saudis
ultimately fill the gap. But the message I think around the
future is that it can't be just opaque that on the right will fill in the
deficits when needed. And this is part of our super cycle
thesis. In the end we're going to see a
structural deficit that can't be managed or met quickly enough through short
cycle barrels. So does anything make you question your
super cycle thesis at a time when you've got Morgan Stanley and you have UBS
moving away from some of their previous forecasts and actually cutting their
near-term outlook for crude prices. Are you doing the same or are you
doubling down and saying are missing the boat.
Yeah I think we're probably in the latter camp of doubling tripling
quadrupling. I mean we've been bullish for two years
now and we've just all we've seen is this.
So gyrations particularly led by uncertainties around demand.
I think there is a degree of sort of confusion as to where demand will
ultimately emerge or a trend to over the medium term.
We still believe that demand will ultimately continue to grow 200 700
million barrels by 20 30. And the issue is this.
If that's right and we have a shortage of all fuels and we're back to the same
issue which is where how do we fund how do we meet this energy deficit in the
future. You can't be coal.
We can't be gas. We're maxed out on energy.
It's got to be through solar and wind. And then when you've gone through that
we still have a major deficit in oil which basically means that we're going
to see repricing of oil significantly higher.
And so we still stand by our upside case 950.
Kristian a question that speaks of the moment.
I've got to get a ways to go here. But I think we have to speak of the
continent of Europe and the hope and prayer of finding energy in the next 12
months the next six months maybe even the next six years.
Maybe it's away from your remit. But do you have an optimism Europe can
succeed in staying warm this winter. I think ultimately where we're okay for
this winter and that's because we've had Nord Stream on.
We've had we have gas gas storage up in 90 per cent.
A recast capacity is roughly 85 percent. We've got the flex time.
The issue is not this winter. It's into next winter.
And then we start to debate Will how do we actually structurally fix this that
this long term supply issue of energy. We can't just provide quick fixes and
kick the can down the road. So if anything I'm more concerned about
as we go into the second half of 2023 how we manage particularly as China
comes back. I think in some ways China has appeased
this deficit this crisis in Europe by virtue of having lockdowns.
If you have lockdowns ease China re-emergence as a marginal buyer of an
energy then we will have deficits in Europe and energy that can only be met
through through gas on as we have gas to oil switching which is clearly bullish
demand for oil particularly through next year which is why we struggled to take
numbers down on demand when all we can see is more will demand for foreign oil
particularly as it's still the cheapest fuel relative to all other.